The finance minister, P Chidambaram’s barely-veiled hint to banks to lower the interest rate on housing loans up to Rs 20 lakh is distressing for a variety of reasons. Notably because it suggests the government is determined to continue with the process of emasculating the banking system; a process set in motion with the farm loan waiver. For votaries of finandal sector reform – and the prime minister and the FM could once be counted among them – it is as if the dock has been turned back and the painstaking progress in moving towards a competitive banking system wasted. Wire money online to India with Xoom.com for as low as $4.99. The objective of the 1991 Narasimham Committee report on financial sector reform was to liberate the banking sector from the shackles of the command and control regime of the pre- reform days. And, barring a few hiccups, successive governments had followed its broad agenda. Till now, that is. The tragedy is that this is happening under a reformist prime minister and finance minister. Many would also question whether it is in order for the FM to tell banks to lower interest rates, that too for housing loans that can by no means be considered ‘small.’ Apart from the fact that FMs in developed markets steer dear of commenting publicly on interest rates, regarding it (rightly) as the central bank’s preserve, remember we are talking of a country where the annual per capita income is about Rs 35,000 while the equated monthly instalment for a housing loan of Rs 20 lakh (at a floating interest rate of 9.75 % for 15 years) works out to Rs 21,200. So these are not small loans by any yardstick; calling for lower interest rates on such loans does not provide the government with even the fig leaf of heiping the aam admi. Moreover the rate charged by individual banks depends on their cost of deposits and business mix. As far as the signalling rate of the RBI is concerned, the key consideration is its outlook on the inflation front. With oil at $106 a barrel, other commodity (espedally foodgrains) prices rising globally and inflation as measured by the wholesale price index rising for the fourth successive week, it is evident inflationary pressures have not abated. In any case, interest rates are the RBI‘s call. It would have been best, therefore, if the [...]
Archive for March 10th, 2008
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PETRO PRICE HIKE: A DROP IN OCEAN
March 10th, 2008 
krishna The increase in retail price of petrol and diesel by RS.2 and Re. 1 per litre would reduce the revenue loss (under recovery) of public sector oil marketing companies by Rs. 840 crore in the remaining weeks of the current financial year. Inspite of the price increase, the under recovery on petrol is Rs.7.25 per litre, Rs. 9 for a litre of diesel, Rs. 19.89 in kerosene and Rs. 331 for a 14.2 kilogram cylinder. Wire money online to India with Xoom.com for as low as $4.99. The government estimates under recoveries in the current financial year to be Rs. 71,800 crore. The increase in revenue from the hike in petrol and diesel prices constitutes a bare 1.2 per cent of the under recoveries. Sources said Finance Minister P Chidambaram opposed the petroleum ministry’s demand for a Re one per litre reduction in excise duty on petrol and diesel. Petroleum secretary M.S. Srinivasan said the under recoveries would have touched Rs. 90,000 crore, but for the appreciation of rupee against dollar and increase in gross refining margin in the first eight months of the current financial year. The upstream companies – Oil and Natural Gas Corporation, Oil India Ltd and GAIL (India)-would be contributing Rs. 24,000 crore in cross subsidy burden sharing to Indian Oil Corporation, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). The government will issue bonds to the tune of Rs. 57,000 crore, constituting 42.70 per cent will be issued by the finance ministry before the end of the financial year. Indian Oil Corporation chairman Sarthak Behuria said the increase in prices of diesel and petrol would substantially reduce the bonds in the next financial year. The oil bonds will also enable the oil companies to meet their working capital requirements. “IOC, BPCL and HPCL have major expansion plans. IOC’s own capital expenditure is in the vicinity of Rs. 10,000 crore per year,” Behuria added. Srinivasan said duty cuts and oil bonds were among the options available to the government. “We were concerned about getting relief for the oil PSUs. Whether it is through excise duty cut or oil bonds are not material,” he stated.
OUR CHILDREN ARE NOT AMUSED
March 10th, 2008 krishna The oldest and possibly the most accessible entertainment centre for youngsters in the capital, Appu Ghar, down its shutters forever. A brainchild of former Prime Minister Indira Gandhi, Appu Ghar, named after the cherubic mascot of the 1982 Delhi-Asiad, was set up in 1984. The closure was in the offing after the Supreme Court in January ordered the Urban Development Ministry to hand over the land, which the park’s management had taken on lease from the International Trade Promotion Council in 1984, to the apex court and the Delhi Metro Rail Corporation. – The land lease had expired in 1999. While the footfalls had decreased over the years and prices of tickets were not as attractive as before, Appu Ghar’s closure will mean the end of one of the last surviving open spaces for children in this city of over 14 million people. In fact, much before Mumbai’s Essel World, Kolkata’s Nicco Park and Kerala’s Veega Land were set up, this amusement park became India’s very own Disney World. Keeping the legal and land lease issues aside, we can’t help but lament the closure of the park because there are hardly any more places left for the young in the city. Some would argue that Delhiites at least have the sprawling India Gate lawns, Nehru Park, Lodi Gardens and Hauz Khas Deer Park, but other than being green manicured patches, there’s not much to do in these places for children. And, the less said the better about neighbourhood parks, most of which have become dustbowls, or, worse still, encroached upon. In comparison, the amusement park was much cleaner and located conveniently, especially, if you wanted to do the National Zoological Garden-Appu Ghar-Dolls Museum circuit. The park also did not too badly when it came to upgrading with the times: Oysters, the water park, was a hit with students. As were the Ice Games. In fact, unadulterated fun in a secured atmosphere was the main reason behind its tremendous popularity. As ‘entertainment’ gets more and more restricted to the digital world and the sanitised environs of shopping malls, the need for open/public spaces for children is increasingly becoming more important than ever before. Almost every other day, there are reports of the ill-effects of a sedentary lifestyle on children, like obesity. A sedentary lifestyle is the forerunner of unhealthy adulthood. It’s high time we think about ways how to get our [...]
CHANGE THE GEAR NOW!
March 10th, 2008 krishna Globally the automotive industry is a key economic sector and drives the emergence of a strong employment-led manufacturing sector. India is no exception. We are the second largest two-wheeler, the 11th largest passenger car and the fifth largest commercial vehicle producer-in the world. In fact, this sector can enable the government to fulfill its two promises: promoting manufacturing and generating employment. An additional car manufactured generates five jobs, a commercial vehicle 13. The current share of employment in the manufacturing sector is around 12 per cent as against 50 to per cent in Malaysia, 62 per cent in Korea and 31per cent in China. Growth in the automotive sector could significantly change this. The government’s Automotive Mission Plan 2006-2016 (AMP) in aims to make India a global automotive hub, accounting for 10 per cent of the GDP and creating 25 or million additional jobs by 2016. The industry is investing over Rs 75,000 crore, of nearly 50 per cent of the investments envisioned in the AMP. Much of this will be in regions that did not have any pre-existing manufacturing activity. The industry is also developing new products. While the unveiling of the Nano attracted global attention, many new two-wheelers, trucks, buses and other products were also on display at the Auto Expo in Delhi. Some products like the ‘i10′ are manufactured here for the world. The industry is committed to making the vision of the AMP a reality. Increasing commodity prices, depreciating dollar, hardening interest rates and high taxes have posed new challenges for the growth of the industry. Considering all these, will we be able to meet the AMP targets? Yes, but there is a need for multiple actions like reduction of taxes, specifically excise duty and the creation of an enabling environment so that the mobility aspirations of Indians are met. An inter-ministerial task force to implement and monitor the AMP is needed. India has the second-largest road network in the world after the US. The US’s network is twice as large as India’s and it carries over 11 times the number of cars. Japan has seven times the number of vehicles but one-third the road length; Brazil twice and China thrice the number of vehicles but with just half the road length. The issue in India is connectivity. A well-connected and efficient road network would be the bedrock [...]
